Exhibit 4.1
5% SUBORDINATED CONVERTIBLE DEBENTURES
THE DEBENTURE REPRESENTED HEREBY HAS NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
PAYMENTS ON ACCOUNT OF THE INDEBTEDNESS EVIDENCED BY THIS DEBENTURE
AND THE EXERCISE OF REMEDIES HEREUNDER ARE SUBORDINATED TO SENIOR INDEBTEDNESS
AS PROVIDED HEREIN.
No. __ $_______
ALLIANCE PHARMACEUTICAL CORP.
5% CONVERTIBLE DEBENTURES DUE AUGUST 22, 2004
Alliance Pharmaceutical Corp., a New York corporation (the "COMPANY"),
for value received hereby promises to pay to ________________ or its registered
assigns ("HOLDER") the principal sum of Seven Million Dollars at the Company's
office or agency for said purpose in New York, New York on August 22, 2004 in
such coin or currency (or, as provided herein, at the Holder's option in Common
Stock) of the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts at the last address of the
Holder (as defined herein) last appearing on the Register (as defined herein).
This Debenture is one of a duly authorized issue of 5% Convertible
Debentures, due August 22, 2004 of the Company (the "DEBENTURE") referred to in
the Securities Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of August
22, 2000, by and among the Company and the Purchasers listed on Schedule I
thereto. The Debentures are subject to the terms and conditions of the Purchase
Agreement. The Company agrees to issue from time to time replacement Debentures
in the form hereof to facilitate any transfers and assignments. In addition,
after delivery of an indemnity in form and substance reasonably satisfactory to
the Company, receipt of evidence of destruction in accordance with Section 2.2
hereof, and, in the case of mutilated Debentures, the delivery to the Company of
such Debentures, the Company also agrees to issue replacement Debentures for
securities which have been lost, stolen, mutilated or destroyed.
The Company shall keep at its principal office a register (the
"REGISTER") in which shall be entered the names and addresses of the registered
holders of the Debentures and particulars of the respective Debentures held by
them and of all transfers of such Debentures. References to the "HOLDER" or
"HOLDERS" shall mean the Person listed in the Register as the payee of any
Debenture unless the payee shall have presented such Debenture to the Company
for transfer and the transferee shall have been entered in the Register as a
subsequent holder, in which case the term shall mean such subsequent holder. The
ownership of the Debentures shall be proven by the Register, absent manifest
error. For the purpose of paying interest and principal on the Debentures, the
Company shall be entitled to rely on the names and addresses in the Register.
No provision of this Debenture shall alter or impair the obligations
of the Company, which are absolute and unconditional, to pay the principal of
and interest on this Debenture at the place, times, rate, and in the currency,
herein prescribed.
The Company will pay interest in arrears from and including the
Original Issue Date on the unpaid principal balance of this Debenture at the
rate of 5% per annum (the "Interest Rate") in an amount equal to $_______
semi-annually on February 22 and August 22 of each year (an "Interest Payment
Date"), commencing on August 22, 2000 to the Holder hereof until the principal
amount is paid or made available for payment, provided that the amount of such
semi-annual interest payment shall be reduced to reflect any reduction in such
unpaid principal balance. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will be paid in cash, or, at the
option of the Company (as provided herein), an equivalent value of the Company's
Common Stock calculated based upon the Conversion Price (as defined herein),
subject to certain conditions contained herein, to the Holder of the Debenture
at the close of business on the Business Day immediately preceding the Interest
Payment Date for the interest payable on such Interest Payment Date.
Any amounts that have become due and payable hereunder and remain
unpaid by the Company shall accrue interest thereafter until payment in full of
such amount at the rate of twenty percent (20%) (the "DEFAULT RATE") per annum
and shall be payable upon demand by the Holder.
Interest, whether at the Interest Rate or the Default Rate, will be
computed on the basis of a fraction, the denominator of which is 365 (or 366 for
any leap year) and the numerator of which is the actual number of days elapsed
from the date such interest begins to accrue, in the case of the Interest Rate,
or becomes due and payable, in the case of the Default Rate.
Each of the Interest Rate and the Default Rate (if otherwise
applicable under the terms hereof) shall be effective both before and after any
judgment may be rendered in a court of competent jurisdiction, PROVIDED,
HOWEVER, that if either the Interest Rate or Default Rate is deemed to be in
excess of the amount permitted to be charged by the Company under applicable
laws, the Holder shall be entitled to collect an Interest Rate or Default Rate,
as the case may be, only at the highest rate permitted by law, and any interest
collected by the Holder in excess of such lawful amount shall be deemed a
payment in reduction of the principal amount then outstanding under this
Debenture and shall be so applied.
The principal of, and any interest paid in cash on, this Debenture are
payable in coin or currency of the United States of America as at the time of
payment is legal tender for payment of public or private debts, at the last
address of the Holder last appearing on the Register, except that interest due
on the principal amount, if any (but not interest overdue for more than five (5)
days), may, at the Company's option be paid in shares of Common Stock calculated
based upon the Conversion Price on the date such interest was due. It shall be
assumed that the Company shall elect to make all payments of interest in cash,
unless the Company shall have given written notice to each Holder not less than
one (1) calendar month prior to the applicable Interest Payment Date of its
intention to pay such interest in Common Stock. Notwithstanding anything to the
contrary contained herein, the Company may not issue shares of Common Stock in
payment of the interest on principal if: (i) the number of shares of Common
Stock at the time authorized, unissued and unreserved for all other purposes is
insufficient to pay interest hereunder in shares of Common Stock or there is an
insufficient number of authorized shares of Common Stock reserved (pursuant to
Section 3.6(b) of the Purchase Agreement) for issue for full conversion of all
of the Debentures issued pursuant to the Purchase Agreement; (ii) such shares
are not either registered for resale pursuant to the Registration Statement (as
defined in the Registration Rights Agreement (as defined herein)) or freely
transferable pursuant to Rule 144 promulgated under the Act, as determined by
counsel to the Company pursuant to a written opinion letter addressed and in
form and substance acceptable to the Holder and the transfer agent for such
shares, subject to receipt, if necessary for such opinion, from the Holder of a
representation from such Holder that it is not an Affiliate (as defined herein)
of the Company; (iii) such shares are not listed or quoted on the Nasdaq (as
defined herein) or a Subsequent Market (as defined herein); (iv) the issuance of
such shares would result in the recipient thereof beneficially owning more than
4.99% of the issued and outstanding shares of Common Stock as determined in
accordance with Section 4.7 hereof; (v) an Event of Default has occurred and is
continuing or an event that, with the passage of time or giving of notice or
both would constitute an Event of Default, has occurred and is continuing; or
(vi) the Company has issued the Issuable Maximum (as defined herein) upon
conversion of or pursuant to the Debentures issued pursuant to the Purchase
Agreement and the Shareholder Approval has not been obtained.
The Holder may from time to time convert the principal amount of this
Debenture, or any portion thereof, with any accrued but unpaid interest, into
Common Stock, as more particularly set forth in Section 4.2.
ARTICLE I
DEFINITIONS
1.1 CERTAIN TERMS DEFINED. The following terms for all purposes of
this Debenture shall have the respective meanings specified below. All
accounting terms used herein and not expressly defined shall have the meanings
given to them in accordance with generally accepted accounting principles (as
defined herein). Capitalized terms not otherwise defined herein shall have the
meanings assigned to them in the Purchase Agreement. The terms defined in this
Section 1.1 include the plural as well as the singular.
"ACCELERATION NOTICE" has the meaning set forth in Section 3.1.
"AFFILIATE" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"APPRAISER" shall mean a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing.
"AUTHORIZATION DATE" has the meaning set forth in Section 4.9.
"AVERAGE PRICE" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8).
"BOARD OF DIRECTORS" means either the Board of Directors of the
Company or any committee of such Board duly authorized to act hereunder.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued after the Original
Issue Date, including, without limitation, all Common Stock and all Preferred
Stock.
"CHANGE OF CONTROL" means the occurrence of any of (i) an acquisition
after the date hereof by an individual or legal entity or "group" (as described
in Rule 13d-5(b)(1) promulgated under the Exchange Act), other than the
Purchasers or any of their Affiliates, of in excess of 33% of the voting
securities of the Company, (ii) a replacement of more than one-half of the
members of the Company's Board of Directors that is not approved by those
individuals who are members of the Board of Directors on the date hereof, or
successors on a continuing Board of Directors, in one or a series of related
transactions, (iii) the merger of the Company with or into another entity where
the shareholders of the Company own less than 50% of the outstanding voting
power of the surviving corporation, (iv) the consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, or (v) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii), (iii) or (iv).
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Company, or the common stock of any successor to the Company following a
Change in Control in which the Company's Common Stock is converted into the
Common Stock of the successor corporation.
"COMPANY" has the meaning set forth in the first paragraph hereof.
"CONVERTIBLE SECURITIES" has the meaning set forth in Section
4.5(e)(i)(A).
"CONVERSION DATE" has the meaning set forth in Section 4.4(a).
"CONVERSION DEFAULT" has the meaning set forth in Section 4.9.
"CONVERSION DEFAULT PAYMENTS" has the meaning set forth in Section
4.9.
"CONVERSION NOTICE" has the meaning set forth in Section 6.1.
"CONVERSION NOTICE DATE" has the meaning set forth in Section 6.2.
"CONVERSION PRICE" has the meaning set forth in Section 4.2(a).
"CONVERSION TRIGGER PRICE" has the meaning set forth in Section 6.1.
"DEBT" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all obligations of such Person as
lessee under capitalized leases, (vi) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person,
provided that for purposes of determining the amount of any Debt of the type
described in this clause, if recourse with respect to such Debt is limited to
such asset, the amount of such Debt shall be limited to the fair market value of
such asset, (vii) all Debt of others guaranteed by such Person, and (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends.
"DEBENTURE" or "DEBENTURES" has the meaning set forth in the second
paragraph hereof.
"DEBENTURE SHARES" means the shares of Common Stock underlying the
Debentures or shares issued upon conversion of the Debentures.
"DEFAULT RATE" has the meaning set forth in the sixth paragraph
hereof.
"DETERMINATION DATE" has the meaning set forth in Section 4.6.
"DTC" means the Depositary Trust Corporation.
"EVENT OF DEFAULT" has the meaning set forth in Section 3.1.
"EXCESS AMOUNT" has the meaning set forth in Section 4.9.
"EXCESS PRINCIPAL" has the meaning set forth in Section 4.6.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FAST" has the meaning set forth in Section 4.4(c).
"GAAP" or "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles in the United States.
"HOLDER", "HOLDER OF DEBENTURES", "DEBENTUREHOLDER" or other similar
terms means the registered holder of any DEBENTURE.
"INCURRENCE" means the incurrence, creation, assumption or in any
other manner becoming liable with respect to, or the extension of the maturity
of or becoming responsible for the payment of, any Debt. "INCUR" shall have a
comparable meaning.
"INTEREST PAYMENT DATE" has the meaning set forth in the fifth
paragraph hereof.
"INTEREST RATE" has the meaning set forth in the fifth paragraph
hereof.
"ISSUABLE MAXIMUM" has the meaning set forth in Section 4.6.
"MANDATORY PREPAYMENT AMOUNT" for any DEBENTURE means the greater of
(i) the sum of (x) 120% of the principal amount of the DEBENTURE to be prepaid
and (y) all other amounts, costs, interest, expenses and liquidated damages due
in respect of such principal amount and (ii) the sum of (x) at the option of the
Holder, either (I) the principal amount of the DEBENTURE to be repaid, plus all
accrued and unpaid interest thereon, divided by the Conversion Price on the date
the Mandatory Prepayment Amount is demanded or otherwise due, multiplied by the
Per Share Market Value on the date the Mandatory Prepayment Amount is demanded
or otherwise due or (II) the principal amount of the DEBENTURE to be prepaid,
plus all accrued and unpaid interest thereon, divided by the lower of either the
Conversion Price or the Average Price on the Trading Day immediately prior to
the date the Mandatory Prepayment Amount is paid in full, multiplied by the Per
Share Market Value on the Trading Day immediately prior to the date the
Mandatory Prepayment Amount is paid in full, and (y) all other amounts, costs,
interest, expenses and liquidated damages due in respect of such principal
amount.
"MATURITY DATE" means the date on which the principal of a DEBENTURE
becomes due and payable as herein provided, whether on the Stated Maturity Date
or pursuant to acceleration upon an Event of Default.
"NASDAQ" means the Nasdaq National Market.
"NOTICE OF CONVERSION" has the meaning set forth in Section 4.2.
"OPTIONAL CONVERSION" has the meaning set forth in Section 6.1.
"OPTIONAL CONVERSION DATE" has the meaning set forth in Section 6.2.
"OPTIONS" has the meaning set forth in Section 4.5(e)(i)(A).
"ORIGINAL ISSUE DATE" of any Debenture (or portion thereof) means the
earlier of (i) the date of such Debenture and (ii) the date of any Debenture (or
portion thereof) for which such security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"PAYMENT BLOCKAGE NOTICE" has the meaning set forth in Section 7.2(b).
"PER SHARE MARKET VALUE" means (i) on any particular Trading Day the
closing bid price per share of the Common Stock on such date (as reported by
Bloomberg Information Services, Inc., or any successor reporting service) on
Nasdaq or, if the Common Stock is not then quoted on Nasdaq, any Subsequent
Market on which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation system on
the date nearest preceding such date (excluding bids posted by the Company, a
Holder or an Affiliate of any such person), or (ii) if the Common Stock is not
listed then on Nasdaq or any Subsequent Market, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date (excluding bids posted by a Holder or an Affiliate of a Holder), or
(iii) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the holder of this Debenture; PROVIDED, HOWEVER, that the Company, after receipt
of the determination by such Appraiser, shall have the right to select in good
faith an additional Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Appraiser; and PROVIDED,
FURTHER that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"PREFERRED STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding or issued
after the date of this Debenture, and includes, without limitation, all classes
and series of preferred or preference stock.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person under generally accepted
accounting principles.
"PURCHASE AGREEMENT" means that Securities Purchase Agreement dated as
of August 22, 2000 by and among the Company and the Purchasers.
"PURCHASE PRICE" means, with respect to any Debenture, the purchase
price paid to the Company upon issuance of such Debenture.
"PURCHASERS" has the meaning ascribed thereto in the Purchase
Agreement.
"REGISTER" has the meaning set forth in the third paragraph hereof.
"REGISTRATION RIGHTS AGREEMENT" means that Registration Rights
Agreement dated as of August 22, 2000 by and among the Company and the
Purchasers.
"RESERVED AMOUNT" has the meaning set forth in Section 4.9.
"REVERSE STOCK SPLIT" has the meaning set forth in Section 4.5(a).
"SENIOR INDEBTEDNESS" shall have the meaning set forth in Section 7.1.
"SHAREHOLDER APPROVAL" has the meaning set forth in Section 4.6.
"STATED MATURITY DATE" means August 22, 2004.
"STOCK OPTION PLAN" means any contract, plan or agreement which has
been approved by the Board of Directors of the Company, pursuant to which the
Company's securities may be issued to any employee, officer, director or
consultant.
"STRATEGIC PARTNER" means any established biotechnology or
pharmaceutical company, with a minimum market capitalization of one billion
dollars, with whom the Company executes a written agreement providing that the
Company and such entity will be "partnered" in the development or distribution
of one or more of the Company's chemical compounds.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned or controlled by such Person. A Person shall not be deemed
to directly or indirectly own a majority of the Capital Stock of another Person
solely because of ownership of an unexercised warrant to acquire Capital Stock
of such other Person if the warrant does not provide for voting control of the
warrant shares prior to its exercise.
"SUBSEQUENT MARKET" means the New York Stock Exchange, American Stock
Exchange, Nasdaq Small Cap Market, London Stock Exchange or Tokyo Stock
Exchange.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such
Subsequent Market on which the Common Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or a Subsequent Market, a day on which
the Common Stock is traded in the over-the-counter Market, as reported by the
OTC Bulletin Board, or (c) if the Stock is not quoted on the OTC Bulletin Board,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions or reporting prices) provided,
however that in any event that the Common Stock is not listed or quoted as set
forth in (a), (b), or (c) hereof, then a Trading Day shall mean any Business
Day.
ARTICLE II
PAYMENT; THE SECURITIES
2.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company covenants and
agrees that it will duly and punctually pay or cause to be paid the principal,
plus all accrued interest thereon, with respect to each of the Debentures at the
place or places, at the respective times and in the manner provided in the
Debentures.
2.2 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN DEBENTURES. In case
any temporary or definitive Debenture shall become mutilated, defaced or be
apparently destroyed, lost or stolen, the Company shall execute and deliver a
new Debenture, bearing a number not contemporaneously outstanding, in exchange
and substitution for the mutilated or defaced Debenture. In every case the
applicant for a substitute Debenture shall furnish to the Company such security
or indemnity as it may reasonably require to indemnify and defend and to save it
harmless and, in every case of destruction, loss or theft evidence to the
Company's satisfaction of the apparent destruction, loss or theft of such
Debenture and of the ownership thereof.
Upon the issuance of any substitute Debenture, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debenture which has matured or is about to mature, or has
been called for conversion in full, or is being surrendered for conversion in
full shall become mutilated or defaced or be apparently destroyed, lost or
stolen, the Company may, instead of issuing a substitute Debenture, with the
holder's consent, pay or authorize the payment or conversion of the same
(without surrender thereof except in the case of a mutilated or defaced
Debenture), if the applicant for such payment shall furnish to the Company such
security or indemnity as it may reasonably require to save it harmless from all
risks, however remote, and, in every case of apparent destruction, loss or
theft, the applicant shall also furnish to the Company evidence to the Company's
reasonable satisfaction of the apparent destruction, loss or theft of such
Debenture and of the ownership thereof, and in the case of mutilated Debentures,
the applicant shall deliver to the Company such Debentures.
Every substitute Debenture issued pursuant to the provisions of this
Section by virtue of the fact that any Debenture is apparently destroyed, lost,
stolen or mutilated shall constitute an additional contractual obligation of the
Company, whether or not the apparently destroyed, lost, stolen or mutilated
Debenture shall be at any time enforceable by anyone and shall be entitled to
all the benefits of (but shall be subject to all the limitations of rights set
forth in) this Debenture equally and proportionately with any and all other
Debentures duly authenticated and delivered hereunder. All Debentures shall be
held and owned upon the express condition that, to the extent permitted by law,
the foregoing provisions are exclusive with respect to the replacement or
payment or conversion of mutilated, defaced, or apparently destroyed, lost,
stolen or mutilated Debentures and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment of negotiable instruments or
other securities without their surrender.
2.3 CANCELLATION OF DEBENTURES; DESTRUCTION THEREOF. All Debentures
surrendered for payment, conversion, registration of transfer or exchange shall
be delivered to the Company for cancellation, and no Debentures shall be issued
in lieu thereof except as expressly permitted by any of the provisions of this
Debenture. The Company shall destroy canceled Debentures held by it and deliver
a certificate of destruction to the Holder, unless otherwise required. If the
Company shall acquire any of the Debentures, such acquisition alone shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Debentures unless and until such indebtedness is satisfied.
ARTICLE III
DEFAULTS
3.1 EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER OF
DEFAULT. In case one or more of the following events ("EVENTS OF DEFAULT")
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
a. default in the payment in cash (or in Common Stock, as permitted
herein), for a period of more than three (3) Business Days, of all or any part
of the principal of and the entire accrued interest on any of the Debentures as
and when the same shall become due and payable either at maturity, upon any
conversion, by declaration or otherwise; or
b. failure on the part of the Company to duly and materially observe
or perform any covenants or agreements on the part of the Company (or the making
by the Company of any announcement, statement or threat that it does not intend
to honor the obligations described in this paragraph) contained in this
Debenture (including the failure to issue Common Stock upon conversion of this
Debenture in accordance with the terms hereof) or the Purchase Agreement or the
Registration Rights Agreement for a period of five (5) Business Days (other than
with respect to an announcement, statement or threat) in the case of a failure
due to circumstances within the Company's control, or thirty (30) Business Days
in the case of a failure due to circumstances not within the Company's control,
after the earlier of (x) the date on which any executive officer of the Company
shall have obtained actual knowledge of such failure (or such announcement,
statement or threat) or (y) the date on which written notice thereof has been
given to the Company by the Holder; or
c. there shall have occurred with respect to any particular issue of
Debt of the Company and/or one or more Subsidiaries having an outstanding
principal amount of $1,000,000 or more in the aggregate for all such issues of
all such Persons, whether such Debt now exists or shall hereafter be created, an
event of default which has entitled the holder thereof to declare such Debt to
be due and payable in full prior to its stated maturity, and such Debt has not
been discharged in full or such acceleration has not been stayed, rescinded or
annulled within ten (10) Business Days of such acceleration; or
d. a judgment or order (not covered by insurance) for the payment of
money shall be rendered against the Company or any Subsidiary of the Company in
excess of $500,000 in the aggregate for all such judgments or orders against all
such Persons (treating any deductibles, self insurance or retention as not so
covered) that shall not be discharged, and all such judgments and orders remain
outstanding, and there shall be any period of thirty (30) consecutive days
following entry of the judgment or order in excess of $500,000 or the judgment
or order which causes the aggregate amount described above to exceed $500,000
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
e. a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company or any of its subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company or any of
its Subsidiaries or for any substantial part of the property of the Company or
any of its Subsidiaries or ordering the winding up or liquidation of the affairs
of the Company or any of its Subsidiaries, and such decree or order shall remain
unstayed and in effect for a period of thirty (30) consecutive days; or
f. the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
the Company or for any substantial part of the property of the Company, or the
Company shall make any general assignment for the benefit of creditors; or
g. any representation, warranty or certification made by the Company
in the Purchase Agreement or in any certificate, financial statement shall prove
to have been incorrect in any material respect when made; or
h. the Common Stock shall be delisted from Nasdaq or shall be
suspended from trading on Nasdaq without resuming trading and/or being relisted
thereon or on a Subsequent Market or having such suspension lifted, as the case
may be, within five (5) Business Days (twenty (20) Business Days if the Company
is in good faith contesting such delisting or suspension); or
i. a Registration Statement (as defined in the Registration Rights
Agreement) for the Debenture Shares shall not have been declared effective by
the Securities and Exchange Commission on or prior to the 30th day after the
Effectiveness Date (as defined in the Registration Rights Agreement) or after
its initial effectiveness and prior to the expiration of the Company's
obligation to keep the Registration Statement effective as required under the
Registration Rights Agreement, such Registration Statement lapses in effect or
sales of all of the Registrable Securities (as defined in the Registration
Rights Agreement) otherwise cannot be made thereunder (whether by reason of the
Company's failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement or otherwise) for more than
fifteen (15) consecutive days or thirty (30) days in any twelve (12) month
period; or
j. the Company shall fail to issue shares of Common Stock, in
accordance with the Purchase Agreement and this Debenture, within three (3)
Trading Days after the Holder delivers a Notice of Conversion pursuant to
Section 4.2 hereof; or
k. an Event of Default has occurred and is continuing under any of the
other Debentures issued pursuant to the Purchase Agreement; or
l. Failure on the part of the Company to comply with its obligations
to close the Second Closing (as defined in the Purchase Agreement) when
requested by the Holders.
then, in each and every such case (other than an Event of Default
specified in Section 3.1(e) or 3.1(f) hereof), unless the principal shall have
already become due and payable, by notice in writing to the Company (the
"ACCELERATION NOTICE"), the Holders of at least a majority of the then
outstanding principal amount of the Debentures may declare the entire principal
of and the entire accrued interest on the Debentures owned by such Holders to be
due and payable immediately, and upon any such declaration the same shall become
immediately due and payable. If an Event of Default specified in Section 3.1(e)
or 3.1(f) occurs, the principal of and any accrued interest on the Debentures
(and the aggregate amounts described below) shall become and be immediately due
and payable without any declaration or other act on the part of any Debenture
Holder. In the event that the Company shall not have promptly, but in any event
within five (5) Business Days after receipt of an Acceleration Notice, shall
have paid a Holder the amount specified below (if applicable, as so specified)
the Conversion Price of such Holder's Debenture shall automatically be adjusted
to equal the average Per Share Market Value of the Common Stock during the
preceding thirty (30) consecutive Trading Days immediately preceding the date of
the Acceleration Notice, if such Per Share Market Value is lower than the
Conversion Price.
The aggregate amount payable upon an Event of Default described in
Section 3.1(a), (e), (f) and (i) to a Holder in respect of such Holder's
Debenture shall be equal to the sum of (i) the Mandatory Prepayment Amount
applicable to such Debenture plus (ii) at the option of the Holder, the
Mandatory Prepayment Amount for the principal amount of the Debentures (the
"CONVERTED DEBENTURES") that would then be held by such Holder had the principal
amount of Debentures converted into Debenture Shares that are then held by the
Holder not been so converted; PROVIDED, that the Holder shall not be entitled to
a Mandatory Prepayment Amount with respect to Converted Debentures if both the
following have occurred: (i) prior to the occurrence of an Event of Default, the
Debenture Shares into which the Converted Debentures were converted had been
held by the Holder for more than thirty (30) days and (ii) prior to the
occurrence of the Event of Default and after receipt by the Holder of the
Debenture Shares that are held by the Holder at the time of the occurrence of
the Event of Default, the Registration Statement with respect to such Debenture
Shares had been continuously effective, and the Common Stock has been quoted on
Nasdaq, for more than thirty (30) days.
The aggregate principal amount payable on each Event of Default other
than as described in Section 3.1(a), (e), (f) and (i) shall be equal to the sum
of (i) the Mandatory Prepayment Amount plus (ii) at the option of the Holder,
the Mandatory Prepayment Amount for the Converted Debentures that would then be
held by such Holder had the principal amount of Debentures converted into
Debenture Shares (as defined herein) that are then held by the Holder not been
so converted; PROVIDED, that the Holder shall not be entitled to a Mandatory
Prepayment Amount with respect to Converted Debentures if prior to the
occurrence of an Event of Default, the Debenture Shares into which the Converted
Debentures were converted had been held by the Holder for more than three (3)
Trading Days.
For purposes of this Section 3.1, the principal amount of the
Debentures is outstanding until such date as the Holder shall have been issued
Debenture Shares upon a conversion (or attempted conversion) thereof. Interest
shall accrue on the Mandatory Prepayment Amount hereunder from the day after
such amount is due (being the date of an Event of Default) through the date of
payment in full thereof at the rate of 20.0% per annum, accruing daily from the
date of conversion until such amount, plus an interest thereon, if any, is paid
in full. Payment of the Mandatory Prepayment Amount pursuant to this Section 3.1
shall be in addition to any other amounts that may be due to the Holder pursuant
to this Debenture. Within five (5) Business Days of receipt by the Holder of
payments of amounts due to the Holder, (i) the Holder shall return the
Debentures to the Company and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Debenture
Shares into which such Converted Debentures were converted. In the event of the
occurrence of an Event of Default, the Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period enforce
any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Any demand for payment may be rescinded
and annulled by a Holder at any time prior to payment hereunder. If a majority
of the Holders rescind and annul any such demand, then the remaining Holders
shall be deemed to rescind and annul any such demand. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
Upon delivery of any Acceleration Notice to the Company, the Company
shall provide a copy of such notice to the other Holders, if any, within one (1)
Business Day of the Company's receipt thereof. Failure to deliver such notice
shall not affect the validity of the notice delivered by the Holders in
accordance with the provisions referred to above.
3.2 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF
DEFAULT. No right or remedy herein conferred upon or reserved to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Holders to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or power or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein; and every power and remedy given by
the Debentures or by law may be exercised from time to time, and as often as
shall be deemed expedient, by the Holders.
ARTICLE IV
EXCHANGE; CONVERSION
4.1 RIGHT OF DEBENTUREHOLDERS TO EXCHANGE DEBENTURES. Subject to and
upon compliance with the provisions of this Section, this Debenture is
exchangeable for an equal principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration of transfer or exchange.
4.2 RIGHT OF DEBENTUREHOLDERS TO CONVERT DEBENTURES INTO COMMON STOCK.
a. CONVERSION PRICE. Subject to and upon compliance with the
provisions of this Section, the Holder of any Debenture shall have the right, at
the Holder's option, at any time prior to the close of business on the Maturity
Date to convert the principal amount of this Debenture, or any portion thereof
(and any accrued but unpaid interest thereon) into duly authorized, validly
issued, fully-paid and nonassessable shares of Common Stock at the conversion
price of $13.32 per share subject to adjustment under the provisions of this
Article IV (the "Conversion Price").
b. NOTICE OF CONVERSION. If an adjustment in the Conversion Price and,
if applicable, a change in the securities or other property issuable upon
conversion has taken place hereunder, then the conversion described in Section
4.2(a) shall be at the applicable Conversion Price and into such securities or
other property as so adjusted. The Purchaser desiring to make a conversion shall
deliver to the Company during usual business hours of the Company's office, or,
at the Purchaser's option, to the transfer agent of the Company during usual
business hours of the transfer agent, a written notice of election to convert,
as provided in the form attached hereto as EXHIBIT A (a "NOTICE OF CONVERSION"),
accompanied, if required, by the Debenture or Debentures, representing at least
the principal amount to be converted.
4.3 ADJUSTMENT FOR DIVIDENDS; INTEREST PAYMENT AFTER CONVERSION. No
payment or adjustment will be made for dividends on any Common Stock except as
provided herein. On conversion of a Debenture, that portion of interest accrued
and unpaid attributable to the period from the Original Issue Date to the
Conversion Date with respect to the converted Debenture shall not be canceled,
extinguished or forfeited, but rather shall be paid in full to the Holder
thereof by the payment of cash; PROVIDED, HOWEVER, that the Company may elect to
pay such amount in shares of Common Stock valued at the Conversion Price if it
provides the Holder with not less than ten (10) days prior written notice of
such intention. If the Holder converts more than one Debenture at the same time,
the number of shares of Common Stock issuable upon the conversion shall be based
on the total principal amount of the Debentures converted.
4.4 ISSUANCE OF SHARES UPON CONVERSION.
a. As promptly as practicable, but in any event no later than two (2)
Trading Days after delivery of a Notice of Conversion and, if required, the
surrender, as herein provided, of any Debenture or Debentures for conversion,
the Company shall deliver or cause to be delivered to the Holder of the
Debenture or Debentures delivering such Notice of Conversion, or such Holder's
designee, a certificate or certificates representing the number of duly
authorized, validly issued, fully-paid and nonassessable shares of Common Stock,
into which such Debenture or Debentures may be converted in accordance with the
provisions of this Article IV. Such conversion shall be deemed to have been made
at the close of business on the date the Notice of Conversion is delivered to
the Company, as long as, if required, the Debenture or Debentures being
converted are promptly delivered to the Company and the rights of the Holder of
such Debenture or Debentures as a Holder (subject to the Company's satisfaction
of its obligations hereunder with respect to such conversion) shall cease at
such time with respect to the Converted Debentures, the Person or Persons
entitled to receive the shares of Common Stock, upon conversion of such
Debenture or Debentures, shall be treated for all purposes as having become the
record holder or holders of such shares of Common Stock at such time, and such
conversion shall be at the Conversion Price in effect at such time (the
"CONVERSION DATE"). Subject to paragraph 4.4(b), if any Debenture is converted
in part only, upon such conversion the Company shall execute and deliver to the
Holder thereof, as requested by such Holder, a new Debenture or Debentures of
authorized denominations in aggregate principal amount equal to the unconverted
portion of such Debenture. Without in any way limiting the Holder's right to
pursue other remedies, including actual damages and/or equitable relief, the
parties hereto agree that if the Company fails to deliver the shares of Common
Stock required to be issued upon the conversion of such Debenture or Debentures
under this Section 4.4 within the two (2) Trading Day period referred above, the
Company shall pay to the Holder upon demand an amount of cash (at the Holder's
option) equal to: (i) the commissions, discounts and similar expenses charged to
the Holder in purchasing a number of shares of Common Stock no greater than the
number of shares of Common Stock required to be issued upon the conversion of
the Debenture or Debentures, or (ii) the product of (w) the number of shares of
Common Stock required to be issued upon the conversion of the Debenture or
Debentures, (x) the Per Share Market Value of such shares on the Conversion
Date, (y) the number of days after such two (2) day period that such shares are
not delivered to the Holder, and (z) 0.005.
b. Notwithstanding anything to the contrary set forth herein, upon
conversion of a Debenture in accordance with the terms thereof, the Holder shall
not be required to physically surrender the Debenture to the Company unless the
entire unpaid principal amount of the Debenture is so converted. The Holder and
the Company shall maintain records showing the principal amount already
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of the Debenture upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of the Debenture is converted, the Holder may not transfer the
Debenture unless the Holder first physically surrenders the Debenture to the
Company, whereupon the Company shall promptly issue and deliver upon the order
of the Holder a new Debenture of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of the
Debenture. The Holder and any assignee, by acceptance of the Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of a Debenture, the unpaid and unconverted
principal amount of such Debenture represented by such Debenture may be less
than the amount stated on the face thereof.
c. In lieu of delivering physical certificates representing the
Debenture Shares, provided the shares of Common Stock issuable upon conversion
of a Debenture may be sold pursuant to Rule 144(k) under the Act or under an
effective Registration Statement and the Company's transfer agent is
participating in the Depository Trust Company Fast Automated Securities Transfer
("FAST") program, upon request of the Holder and in compliance with the
provisions of Sections 4.1, 4.2 and 4.4, the Company shall use its best efforts
to cause its transfer agent to electronically transmit the shares of Common
Stock issuable upon conversion of the Debenture to the Holder by crediting the
account of the Holder's Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. The time period for delivery described in the
immediately preceding paragraph shall apply to the electronic transmittals
described herein.
d. In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates pursuant
to Section 4.4(a), including for purposes hereof, any shares of Common Stock to
be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, by the second (2nd) Trading Day after the Conversion Date, and if
after such second (2nd) Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by
such Holder of the Debenture Shares which the Holder was entitled to receive
upon such conversion (a "BUY-IN"), then the Company shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by the Holder) the
amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that such Holder was
entitled to receive from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either return the Debentures for
which such conversion was not honored or deliver to such Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its conversion and delivery obligations under Section 4.4(a). For
example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
with respect to which the market price of the Debenture Shares on the date of
conversion totaled $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.
4.5 ADJUSTMENT OF CONVERSION PRICE. In addition to any adjustment to
the Conversion Price provided elsewhere in this Debenture, the Conversion Price
in effect at any time shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
a. COMMON STOCK DIVIDENDS; COMMON STOCK SPLITS; REVERSE COMMON STOCK
SPLITS. If the Company, at any time while this Debenture is outstanding, (a)
shall pay a stock dividend on its Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine outstanding shares
of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of Capital Stock of the
Company, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this paragraph 4.5(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
Notwithstanding the foregoing, if the Company shall combine outstanding shares
of Common Stock into a smaller number of shares (a "REVERSE STOCK SPLIT") at any
time prior to the Maturity Date, then the Conversion Price in effect immediately
prior to such reverse stock split shall not be adjusted and shall remain in
effect after giving effect to such reverse stock split.
b. RIGHTS; OPTIONS; WARRANTS OR OTHER SECURITIES. If the Company, at
any time while this Debenture is outstanding, shall fix a record date for the
issuance of rights, options, warrants or other securities to all of the holders
of Common Stock entitling them to subscribe for or purchase, convert to,
exchange for or otherwise acquire shares of Common Stock for no consideration or
at a price per share less than the Conversion Price, the Conversion Price shall
be multiplied by a fraction, the denominator of which shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights, options, warrants or other securities plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the numerator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights, options, warrants or other securities plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at the Conversion Price. Such adjustment shall be made whenever
such rights, options, warrants or other securities are issued, and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants.
c. SUBSCRIPTION RIGHTS. If the Company, at any time while this
Debenture is outstanding, shall fix a record date for the distribution to all of
the holders of Common Stock evidence of its indebtedness or assets or rights,
options, warrants or other securities entitling them to subscribe for, purchase,
convert to, exchange for or to otherwise acquire any security (excluding those
referred to in Sections 4.5(a) and (b) above), then in each such case the
Conversion Price at which the Debenture shall thereafter be exercisable shall be
determined by multiplying the Conversion Price in effect immediately prior to
the record date fixed for determination of shareholders entitled to receive such
distribution by a fraction, the denominator of which shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and the numerator of which shall be such Per Share Market Value of the Common
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith; PROVIDED, HOWEVER, that in the event of a distribution exceeding
twenty percent (20%) of the net assets of the Company, such fair market value
shall be determined by an Appraiser selected in good faith by the Holder; and
PROVIDED, FURTHER, that the Company, after receipt of the determination by such
Appraiser shall have the right to select an additional Appraiser meeting the
same qualifications, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
d. OTHER EVENTS. In case of (A) any reclassification of the Common
Stock into other securities of the Company or (B) any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash or
property (each of (A) or (B), an "EXTRAORDINARY EVENT"), the Holder shall have
the right thereafter to convert the Debenture for shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such Extraordinary Event, that the Holder would have been
entitled to receive had it converted the Debenture immediately prior to such
Extraordinary Event (without taking into account any limitations or restrictions
on the convertibility of the Debentures) would have been entitled. In the case
of an Extraordinary Event, the terms of any such Extraordinary Event shall
include such terms so as to continue to give to the Holder the right to receive
the securities, cash or property set forth in this Section 4.5(d) upon any
conversion following such Extraordinary Event. This provision shall similarly
apply to successive Extraordinary Events.
e. ADJUSTMENT TO CONVERSION PRICE FOR DILUTIVE ISSUANCES. If the
Company, at any time while this Debenture is outstanding, takes any of the
actions described in this Section 4.5(e), then, in order to prevent dilution of
the rights granted under this Debenture, at any time prior to the Maturity Date,
the Conversion Price will be subject to adjustment from time to time as provided
in this Section 4.5(e).
(i) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.
If at any time while this Debenture is outstanding the Company issues or
sells, or is deemed to have issued or sold, any shares of Common Stock for
a consideration per share less than the Conversion Price in effect
immediately prior to such issuance or sale, then immediately after such
issuance or sale the Conversion Price then in effect shall be reduced to an
amount equal to the consideration per share of Common Stock in such
issuance or sale. For the purpose of determining the adjusted Conversion
Price under this Section 4.5(e), the following shall be applicable:
(A) ISSUANCE OF OPTIONS. If at any time while this Debenture
is outstanding the Company in any manner grants, issues or sells any
rights, options, warrants, or options to subscribe for or to purchase
Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (such rights, warrants or options,
"OPTIONS," and such convertible or exchangeable stock or securities,
"CONVERTIBLE SECURITIES") and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities is less than the Conversion
Price in effect immediately prior to such grant or issuance, then the
Conversion Price then in effect shall be reduced to equal the price
per share for which Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible
Securities. No adjustment of the Conversion Price shall be made upon
the actual issuance of such Common Stock upon conversion or exchange
of such Options.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If at any time while
this Debenture is outstanding the Company in any manner issues or
sells any Convertible Securities and the price per share for which
Common Stock is issuable upon such conversion or exchange is less than
the Conversion Price in effect immediately prior to issuance or sale,
then the Conversion Price then in effect shall be reduced to an amount
equal to the price per share for which the Common Stock is issuable
upon the conversion or exchange of such Convertible Securities. No
adjustment of the Conversion Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(C) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. In the
event that there is a change at any time in (i) the exercise price
provided for in any Options, (ii) the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock, other than a change
which results from events set for in Sections 4.5(a), (b) and (c)
which also cause a relative change in the Conversion Price, then
immediately after such change in option price, additional
consideration or rate of conversion the Conversion Price in effect at
the time of such change shall be readjusted to the Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
exercise price, additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold;
provided that no adjustment shall be made if such adjustment would
result in an increase of the Conversion Price in effect prior to such
adjustments.
(D) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Conversion Price under this
Section 4.5(e)(i), the following shall be applicable:
(I) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Options or Convertible
Securities are issued or sold or deemed to
have been issued or sold for cash, the
consideration received therefor will be
deemed to be the net amount received by the
Company therefor. In case any Common Stock,
Options or Convertible Securities are issued
or sold for a consideration other than cash,
the amount of the consideration other than
cash received by the Company will be the fair
value of such consideration, except where
such consideration consists of securities, in
which case the amount of consideration
received by the Company will be the Average
Price on the Trading Day immediately
preceding the date of receipt. In case any
Common Stock, Options or Convertible
Securities are issued to the owners of the
non-surviving entity in connection with any
merger in which the Company is the surviving
entity the amount of consideration therefor
will be deemed to be the fair value of such
portion of the net assets and business of the
non-surviving entity as is attributable to
such Common Stock, Options or Convertible
Securities, as the case may be. The fair
value of any consideration other than cash or
securities will be determined in good faith
by the Board of Directors of the Company.
(II) INTEGRATED TRANSACTIONS. In case any Option
is issued in connection with the issue or
sale of other securities of the Company,
together comprising one integrated
transaction in which no specific
consideration is allocated to such Options by
the parties thereto, the Options will be
deemed to have been issued for an aggregate
consideration of $0.01.
(III) TREASURY SHARES. The number of shares of
Common Stock outstanding at any given time
does not include shares owned or held by or
for the account of the Company, and the
disposition of any shares so owned or held
will be considered an issue or sale of Common
Stock.
(IV) RECORD DATE. If the Company establishes a
record of the holders of Common Stock for the
purpose of entitling them (1) to receive a
dividend or other distribution payable in
Common Stock, Options or in Convertible
Securities or (2) to subscribe for or
purchase Common Stock, Options or Convertible
Securities, then such record date will be
deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have
been issued or sold upon the declaration of
such dividend or the making of such other
distribution or the date of the granting of
such right of subscription or purchase, as
the case may be.
(E) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 4.5(e) (subject to the
exceptions stated therein) but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the
rights of the Holder, or assigns, of this Debenture; provided,
however, that no such adjustment will increase the Conversion Price as
otherwise determined pursuant to this Section 4.5(e).
Notwithstanding anything to the contrary contained in this Section
4.5(e) no adjustment shall be made to the Conversion Price in connection with
the issuance, sale or grant of any of the following securities, whether or not
at a price that is less than the Conversion Price:
(i) shares of Common Stock issuable upon the exercise of any options
or warrants outstanding on the date hereof and listed in Schedule 2.1(c) of the
Purchase Agreement;
(ii) shares of Common Stock or options to acquire Common Stock issued
or deemed to have been issued by the Company in connection with a stock option
plan, 401(k) plan or employee stock purchase plan; and
(iii) shares of Common Stock underlying the Debentures or shares
issued upon the conversion of the Debentures.
f. ROUNDING. All calculations under this Section 4.5 shall be made to
the nearest cent or the nearest l/l00th of a share, as the case may be.
g. NOTICE OF ADJUSTMENT. The Company shall give the Holder written
notice of the occurrence of any of the events specified in Sections 4.5(a), (b),
(c), (d) or (e) as soon as practicable, but in no event later than three (3)
Business Days after such event, provided further, that if such notice contains
material non-public information, the Company shall (i) publicly disclose such
information prior to or concurrently with the giving of such notice or (ii) only
disclose such information to the extent that the Holder shall not be in
possession of material non-public information. Such notice shall contain at
least: (A) a description of the event, (B) the adjusted Conversion Price with a
reference to the applicable paragraph in Section 4.5 hereof, if calculable at
the time, and (C) the date on which the adjusted Conversion Price is effective.
4.6 NASDAQ LIMITATION. If on any date (the "DETERMINATION DATE") (a)
the Common Stock is listed for trading on Nasdaq, (b) the Conversion Price then
in effect is such that the aggregate number of shares of Common Stock that would
then be issuable upon conversion in full of the then outstanding principal
amount of the Debentures as if all such Debentures were converted on such
Determination Date (without regard to any limitations on conversions) and as
payment of interest thereon, would equal or exceed 20% of the number of shares
of the Common Stock outstanding immediately prior to the "CLOSING DATE" (the
"ISSUABLE MAXIMUM"), and (c) the Company shall not have previously obtained the
vote of the shareholders of the Company (the "SHAREHOLDER APPROVAL"), if any, as
may be required by the applicable rules and regulations of Nasdaq (or any
successor entity) to approve the issuance of shares of Common Stock in excess of
the Issuable Maximum in a private placement whereby shares of Common Stock are
deemed to have been issued at a price that is less than the greater of book
value or fair market value of the Common Stock, then with respect to the
aggregate principal amount of the Debentures then held by the Holders for which
a conversion in accordance with the Conversion Price would result in an issuance
of shares of Common Stock in excess of such Holder's pro rata allocation (as
described below) of the Issuable Maximum (the "EXCESS PRINCIPAL") the Company
may elect to prepay cash to the Holders in an amount equal to the Mandatory
Prepayment Amount. Any such election by the Company must be made in writing to
the Holders within two (2) Trading Days after the first such Determination Date
and the payment of such Mandatory Prepayment Amount applicable to such
prepayment must be made in full to the Holders with ten (10) Business Days after
the date such notice is delivered. If the Company does not deliver timely a
notice of its election to prepay under this Section or shall, if it shall have
delivered such a notice, fail to pay the prepayment amount hereunder within ten
(10) Business Days thereafter, then each Holder shall have the option by written
notice to the Company, to, if applicable, declare any such notice given by the
Company, if given, to be null and void and require the Company to either: (i)
use its best efforts to obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the 60th day
after such request unless the Company has previously used its best efforts to,
but has failed to, obtain such approval (provided, that if the Company shall
fail to obtain the Shareholder Approval during such 60-day period, the Holder
may demand the cash payment set forth in Section 4.6(ii) herein) or (ii) pay
cash to such Holder, within five (5) Business Days of such Holder's notice, in
an amount equal to the Mandatory Prepayment Amount for such Holder's portion of
the Excess Principal. The payment of the Mandatory Prepayment Amount to each
Holder pursuant to this Section shall be determined on a pro rata basis upon the
principal amount of the Debentures held by such Holder on the Determination Date
which is in excess of the pro rata allocation of the Issuable Maximum. If the
Company fails to pay the Mandatory Prepayment Amount in full pursuant to this
Section within five (5) Business Days after the date payable, the Company will
pay interest thereon at a rate of 20% per annum to the converting Holder,
accruing interest daily from the date of conversion until such amount, plus all
such interest thereon, if any, is paid in full. Until the Company has received
the Shareholder Approval no Holder of the Debentures shall be issued, upon
conversion of Debentures, shares of Common Stock in an amount greater than such
Holder's allocated portion of the Issuable Maximum pursuant to Section 4.14.
4.7 RESTRICTION ON CONVERSION BY EITHER THE HOLDER OR THE COMPANY.
Notwithstanding anything herein to the contrary, in no event shall any Holder or
the Company have the right or be required to convert any or all of the aggregate
principal amount and interest accrued thereon of this Debenture if as a result
of such conversion the aggregate number of shares of Common Stock beneficially
owned by such Holder and its Affiliates would exceed 4.99% of the outstanding
shares of the Common Stock following such conversion. For purposes of this
Section 4.7, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. The provisions of this
Section 4.7 may be waived by a Holder as to itself (and solely as to itself)
upon not less than 65 days prior written notice to the Company, and the
provisions of this Section 4.7 shall continue to apply until such 65th day (or
later, if stated in the notice of waiver).
4.8 OFFICER'S CERTIFICATE. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of Section 4.5,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Debentures and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the each of
the Holders.
4.9 RESERVATION OF SHARES. The Company covenants that it will at all
times reserve and keep available out of its authorized shares of Common Stock,
free from preemptive rights, solely for the purpose of issue upon conversion of
the Debentures as herein provided, such number of shares of the Common Stock as
shall then be issuable upon the conversion of all outstanding Debentures into
Common Stock in accordance with Section 3.6(b) of the Purchase Agreement (the
"RESERVED AMOUNT"). The Company covenants that all shares of the Common Stock
issued upon conversion of the Debenture which shall be so issuable shall, when
issued, be duly and validly issued and fully paid and non-assessable.
If, at any time a Holder of this Debenture submits a Conversion
Notice, and the Company does not have sufficient authorized but unissued shares
of Common Stock available to effect such conversion in accordance with the
provisions of this Article IV (a "CONVERSION DEFAULT"), subject to Section 4.14,
the Company shall issue to the Holder all of the shares of Common Stock which
are then available to effect such conversion. The portion of this Debenture
which the Holder included in its Conversion Notice and which exceeds the amount
which is then convertible into available shares of Common Stock (the "EXCESS
AMOUNT") shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock in accordance with the terms hereof until (and
at the Holder's option at any time after) the date additional shares of Common
Stock are authorized by the Company to permit such conversion at which time the
Conversion Price in respect thereof shall be the lesser of (i) the Per Share
Market Value on the Conversion Default Date (as defined below) and (ii) the Per
Share Market Value on the Conversion Date thereafter elected by the Holder in
respect thereof. In addition, the Company shall pay to the Holder payments
("CONVERSION DEFAULT PAYMENTS") for a Conversion Default in the amount of (x)
the sum of (1) the then outstanding principal amount of this Debenture plus (2)
accrued and unpaid interest on the unpaid principal amount of this Debenture
through the Authorization Date (as defined below) plus (3) Default Interest, if
any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y)
.24, multiplied by (z) (N/365), where N equals the number of days from the day
the holder submits a Notice of Conversion giving rise to a Conversion Default
(the "CONVERSION DEFAULT DATE") to the date (the "AUTHORIZATION DATE") that the
Company authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Debenture. The
Company shall use its best efforts to authorize a sufficient number of shares of
Common Stock as soon as practicable following the earlier of (i) such time that
the Holder notifies the Company or that the Company otherwise becomes aware that
there are or likely will be insufficient authorized and unissued shares to allow
full conversion thereof and (ii) a Conversion Default. The Company shall send
notice to the Holder of the authorization of additional shares of Common Stock,
the Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock following the Authorization
Date) at the applicable Conversion Price, at the Holder's option, as follows:
(a) In the event Holder elects to take such payment in cash, cash
payment shall be made to Holder by the fifth (5th) Business Day of the month
following the month in which it has accrued; and
(b) In the event Holder elects to take such payment in Common Stock,
the Holder may convert such payment amount into Common Stock at the lesser of
the Conversion Price (as in effect at the time of conversion) and the Per Share
Market Value (on the fifth day of the month referred to below) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article IV (so long as there is then a
sufficient number of authorized shares of Common Stock).
The Holder's election shall be made in writing to the Company at any
time prior to 8:00 p.m., New York City Time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the conversion Default Payments) for the Company's failure
to maintain a sufficient number of authorized shares of Common Stock, and each
Holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).
4.10 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
conversion of Debentures hereunder require registration with or approval of any
governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon conversion, the
Company will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
4.11 FRACTIONAL SHARES. Upon a conversion hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares of
the Common Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Per Share Market Value at such
time. If the Company elects not, or is unable, to make such a cash payment, the
holder shall be entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.
4.12 PAYMENT OF TAX UPON ISSUE OR TRANSFER. The issuance of
certificates for shares of the Common Stock on conversion of the Debentures
shall be made without charge to the Holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such Debentures so converted and the Company shall not be required to issue
or deliver such certificates unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has been
paid.
4.13 NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
8:00 p.m. EST where such notice is to be received), or the first Business Day
following such delivery (if received after 8:00 p.m. EST where such notice is to
be received) or (b) on the second Business Day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications are (i) if to the Company to Alliance Pharmaceutical Corp.,
6175 Lusk Boulevard, San Diego, California 92121, Attention: President,
facsimile number: (858) 410-5343 with a copy to Stroock & Stroock & Lavan LLP,
180 Maiden Lane, New York, New York 10038, Attention: Melvin Epstein, facsimile
number: (212) 806-6006 and (ii) if to any Holder to the address set forth on
Schedule II to the Purchase Agreement with copies to Akin, Gump, Strauss, Hauer
& Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attention: James
Kaye, fax no. (212) 872-1002, or such other address as may be designated in
writing hereafter, in the same manner, by such Person.
4.14 ALLOCATIONS OF ISSUABLE MAXIMUM AND RESERVED AMOUNT. The Issuable
Maximum and Reserved Amount shall be allocated pro rata among the Holders based
on the principal amount of Debentures issued to each Holder. Each increase to
the Issuable Maximum and Reserved Amount shall be allocated pro rata among the
Holders based on the principal amount of Debentures held by each Holder at the
time of the increase in the Issuable Maximum or Reserved Amount. In the event a
Holder shall sell or otherwise transfer any of such Holder's Debentures, each
transferee shall be allocated a pro rata portion of such transferor's Issuable
Maximum and Reserved Amount. Any portion of the Issuable Maximum or Reserved
Amount which remains allocated to any person or entity which does not hold any
Debentures shall be allocated to the remaining Holders, pro rata, based on the
principal amount of such Debentures then held by such Holders.
ARTICLE V
CONSOLIDATION, MERGER OR SALE OF COMPANY
5.1 CONSOLIDATION, MERGER OR SALE ONLY ON CERTAIN TERMS. The Company
shall not consolidate with or merge into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety to any Person, and
the Company shall not permit any Person to consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
a. in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the Person formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety shall be a corporation, partnership or trust whose Common Stock is
traded on the Nasdaq or a Subsequent Market, and shall expressly assume, by a
Debenture supplemental hereto, executed and delivered to the Holders, in form
satisfactory to the Holders of a majority of the then outstanding principal
amount of the Debentures, the due and punctual payment of the principal of and
interest on all the Debentures and the performance or observance of every
covenant of this Debenture on the part of the Company to be performed or
observed and shall have provided for conversion rights in accordance with
Section 5.3; and
b. immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary as a
result of such transaction as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default shall have
happened and be continuing.
5.2 SUCCESSOR SUBSTITUTED. Upon any consolidation of the Company with,
or merger of the Company into, any other Person or any conveyance, transfer or
lease of the properties and assets of the Company substantially as an entirety
in accordance with Section 5.1, the successor person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Debenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Debenture.
5.3 CONVERSION RIGHTS. In case of any consolidation of the Company
with, or merger of the Company into, any other Person, any merger of another
Person into the Company (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company) or any sale or transfer of all or substantially all
of the assets of the Company, the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall in the supplemental Debenture provided pursuant to Section 5.1(a) provide
that the Holder of each Debenture then outstanding shall have the right
thereafter, during the period such Debenture shall be convertible as specified
in Article IV, to convert such Debenture only into the kind and amount of
securities, cash or other assets receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock of the
Company into which such Debenture might have been converted immediately prior to
such consolidation, merger, sale or transfer. The supplemental Debenture also
shall provide that if in connection with such consolidation, merger, sale or
transfer, each holder of Common Stock is entitled to elect to receive either
securities, cash or other assets receivable upon such consolidation, merger,
sale or transfer, the Company or the surviving or transferee corporation shall
provide each holder of securities with the right to elect to receive the
securities, cash or other assets into which the Debentures held by such Holder
shall be convertible after completion of such consolidation, merger, sale or
transfer on the same terms and subject to the same conditions applicable to
holders of Common Stock (including, without limitation, notice of the right to
elect, limitations on the period in which such election shall be made and the
effect of failing to exercise the election). Such supplemental Debenture shall
provide for adjustments which, for events subsequent to the effective date of
such supplemental Debenture, shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Article. The above provisions of this
Section shall similarly apply to successive consolidations, mergers, sales or
transfers.
ARTICLE VI
OPTIONAL CONVERSION
6.1 OPTIONAL CONVERSION.
a. The Debentures issued at the First Closing are convertible in whole
at the option of the Company, from time to time, subject to the following
condition, and subject also to the other conditions set forth in this Article VI
(the "Optional Conversion"):
(i) If, after nine (9) months following the Effectiveness Date
(as defined in the Registration Rights Agreement), the Per Share
Market Value has been greater than Twenty Six Dollars and Sixty Four
Cents ($26.64) subject to adjustment in the same manner in which the
Conversion Price is adjusted as provided in Sections 4.5(a), (b), (c)
and (d) (the "CONVERSION TRIGGER PRICE") for at least twenty five (25)
out of thirty (30) consecutive Trading Days.
b. Subject to the condition set forth in Section 5.1(a), so long as
(i) no Event of Default (or any event that with the passage of time or giving of
notice or both would constitute an Event of Default) shall have occurred and be
continuing, (ii) any Registration Statement required to be filed and be
effective pursuant to the Registration Rights Agreement is then in effect and
has been in effect and sales of all of the Registrable Securities can be made
thereunder for at least twenty (20) days prior to the Conversion Notice Date (as
defined below) and (iii) the Company has a sufficient number of authorized
shares of Common Stock reserved for issuance upon full conversion of the
Debentures, upon ten (10) Business Days prior written notice to the Holder (a
"CONVERSION NOTICE"), the entire principal amount of the Debenture may be
converted by the Company, in whole into shares of Common Stock at the Conversion
Price, and accrued interest may be converted into shares of Common Stock at the
Conversion Price on the Business Day prior to conversion.
6.2 MECHANICS OF CONVERSION. The Company must exercise its right to
cause an Optional Conversion hereunder by delivering Conversion Notice by
facsimile and overnight courier to each Holder, no later than three (3) Business
Days after the occurrence of a condition set forth in Section 6.1(a)(i) (such
deadline the "CONVERSION NOTICE DATE"). Such Conversion Notice shall indicate
(a) the Conversion Price, (b) the number of shares of Common Stock that each
Holder shall receive as a result of the Optional Conversion and (c) a
confirmation of the date that the Company shall effect the Optional Conversion
and issue shares of Common Stock to the Holders (the "OPTIONAL CONVERSION
DATE"), on the Optional Conversion Date, unless there is a disagreement as
described below. The Company shall issue the Common Stock on the Optional
Conversion Date unless the Holder notifies the Company within three (3) Business
Days after receipt of the Conversion Notice from the Company that the Holder
disagrees with the occurrence of the Optional Conversion or any other matter
contained in the Conversion Notice. If the Holder and the Company fail to agree
upon the occurrence of the Optional Conversion or any other matter contained in
the Conversion Notice within one (1) Business Day after the Holder has given
such notice, the matter shall be determined promptly by a securities firm (the
fees and expenses of which shall be paid by the Company) acceptable to both the
Holder and the Company, and such computation shall be final and binding. The
Optional Conversion shall be subject to the provisions set forth in Section 4.4,
mutatis mutandis.
If the Company does not deliver the Conversion Notice by the
Conversion Notice Date, then the Company shall not have the right to effect an
Optional Conversion until a condition set forth in Section 6.1(a)(i) occurs
again after such Conversion Notice Date. An example of how the Optional
Conversion right operates is as follows: Thirty (30) consecutive Trading Days
occur during which the Per Share Market Value of the Common Stock is greater
than the Conversion Trigger Price. The Conversion Notice Date is two (2)
Business Days after the end of the thirty (30) day trading period. If the
Company delivers the Conversion Notice by the Conversion Notice Date, it has
properly exercised its Optional Conversion right and subject to this Section
6.2, the Debentures will be converted as provided herein. If the Company fails
to deliver the Conversion Notice on or prior to the Conversion Notice Date, then
there must again occur a thirty (30) consecutive day trading period in which the
Per Share Market Value is in excess of the Conversion Trigger Price before the
Company may again exercise its Optional Conversion right.
ARTICLE VII
SUBORDINATION OF DEBENTURES
7.1 DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS. The Company
covenants and agrees, and each Holder of a Debenture, by his acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Article, the payment of the principal of (and premium, if any)
and interest on each and all of the Debentures are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness. "SENIOR INDEBTEDNESS" shall mean any indebtedness,
liabilities and other obligations of the Company (whether as primary obligor or
as guarantor) to any Person (each a "SENIOR LENDER"), now existing or incurred
hereafter, with respect to a Twenty Five Million dollar ($25,000,000) basket of
senior corporate debt from a traditional lender and debt incurred as a result of
a transaction with a corporate Strategic Partner.
7.2 NO PAYMENT ON DEBENTURES IN CERTAIN CIRCUMSTANCES.
a. No payment or distribution of cash or property (other than Common
Stock of the Company or other securities of the Company that are subordinated to
Senior Indebtedness to at least the same extent as the Debentures) of the
Company will be made on account of principal of or interest on the Debentures,
or to defease or acquire any of the Debentures, or on account of the conversion
provisions of the Debentures and no action shall be taken (judicial or
otherwise) to collect any such payment or distribution (i) upon the maturity of
any Senior Indebtedness by lapse of time, acceleration or otherwise, unless and
until all Senior Indebtedness shall first be paid in full in cash, or such
payment duly made in a manner satisfactory to the holders of such Senior
Indebtedness or (ii) in the event that the Company defaults in the payment of
any principal of, premium, if any, or interest on or any other amounts payable
on or due in connection with any Senior Indebtedness when it becomes due and
payable, whether at maturity or at a date fixed for prepayment or by declaration
or otherwise, unless and until such default has been waived in writing by the
holders of the Senior Indebtedness. Payments on the Debentures may and shall be
resumed in the case of a payment default only upon the date on which such
default is waived in writing by the holders of the Senior Indebtedness or their
agent.
b. If any default OTHER THAN a default contemplated by Section
7.2(a)(ii) above shall have occurred and be continuing that would permit the
holders of the Senior Indebtedness to accelerate the maturity of Senior
Indebtedness, upon written notice (a "PAYMENT BLOCKAGE NOTICE") of the default
given to the Company and the Holders by the holders of, or an agent, trustee or
other representative for, such Senior Indebtedness, then, unless and until such
default has been waived in writing, no payment or distribution of cash or
property (other than Common Stock of the Company or other securities of the
Company that are subordinated to Senior Indebtedness to at least the same extent
as the Debentures) shall be made by the Company with respect to the principal of
or interest on the Debentures or on account of conversion of the Debentures or
to acquire or repurchase any of the Debentures for cash or property other than
Common Stock of the Company, and no action shall be taken (judicial or
otherwise) to collect any such payment or distribution. If such Senior
Indebtedness is not declared due and payable within 180 days after written
notice of the event of default is given, promptly after the end of the 180-day
period the Company will pay all sums due in respect of the Debentures and not
paid during the 180-day period. During any 360-day consecutive period, only one
such period during which payment with respect to the Debentures may not be made
as the result of a Payment Blockage Notice may commence and the duration of such
period may not exceed 180 days. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Holders
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been waived for a period of not less than 90 days.
c. If any payment or distribution of assets of the Company is received
by any Holder in respect of the Debentures at a time when that payment or
distribution should not have been made because of paragraph (a) or (b) of this
Section 7.2, and provided that prior to the Company's disbursement of such
distribution or payment, the Holders shall have received a written notice from
the Company or from an agent or representative for one or more holders of Senior
Indebtedness, such payment or distribution will be received and held and will be
paid over to the holders of Senior Indebtedness (pro rata as to each of such
holders on the basis of the respective amounts of Senior Indebtedness held by
them) until all such Senior Indebtedness has been paid in full, after giving
effect to any concurrent payment or distribution or provision therefor to the
holders of such Senior Indebtedness.
7.3 DEBENTURES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
INDEBTEDNESS ON DISSOLUTION, LIQUIDATION OR REORGANIZATION. Upon any
distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company (whether in bankruptcy, insolvency,
receivership or similar proceedings relating to the Company or its property or
upon an assignment for the benefit of creditors or any marshalling of the
Company's assets or liabilities or otherwise):
a. the holders of all Senior Indebtedness will first be entitled to
receive payment in full of the principal of and interest due on Senior
Indebtedness (including interest accruing after the commencement of a bankruptcy
or insolvency) at the rate specified in the applicable Senior Indebtedness
documents and including, without limitation, in respect of premiums, indemnities
or otherwise, before the Holders are entitled to receive any payment or
distribution on account of the principal of or interest on the Debentures;
b. any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (except that Holders may
receive securities that are subordinated at least to the same extent as the
Debentures to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness), to which Holders would be entitled except for the
provisions of this Section 7.3 will be paid by the liquidating trustee or agent
or other persons legally empowered to make such a payment or distribution
directly to the holders of Senior Indebtedness (pro rata to such holders on the
basis of the respective amounts of Senior Indebtedness held by such holders) or
their representatives to the extent necessary to make or provide for payment in
full in cash of all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness or provision for that payment or distribution; and
c. if, notwithstanding the foregoing, any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities (except that Holders may receive securities that are subordinated at
least to the same extent as the Debentures to Senior Indebtedness and any
securities issued in exchange for Senior indebtedness) is received by the
Holders on account of the principal of or interest on the Debentures before all
Senior Indebtedness is paid in full, such payment or distribution will be
received and held in trust for and will be forthwith paid over to the holders of
the Senior Indebtedness remaining unpaid or unprovided for or their
representatives for application (in the cash of cash) to, or as collateral (in
the case of non-cash property or securities) for the payment of such Senior
Indebtedness until all such Senior Indebtedness has been paid in full, after
giving effect to any concurrent payment or distribution or provision therefor to
the holders of such Senior Indebtedness.
The Company will give prompt written notice to the Holders of any
dissolution, winding up, liquidation or reorganization of it or any assignment
for the benefit of its creditors.
7.4 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS. Subject
to the payment in full of all Senior Indebtedness, the Holders shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until all amounts owing on the Debentures
shall be paid in full; and, for the purposes of such subrogation:
a. no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders would be
entitled except for the provisions of this Article VII and no payment pursuant
to the provisions of this Article VII to the holders of Senior Indebtedness by
the Holders shall, as between the Company, its creditors (other than holders of
Senior Indebtedness) and the Holders, be deemed to be a payment by the Company
to or on account of the Senior Indebtedness; and
b. no payment or distributions of cash, property or securities to or
for the benefit of the Holders pursuant to the subrogation provision of this
Article VII, which would otherwise have been paid to the holders of Senior
Indebtedness, shall be deemed to be a payment by the Company to or for the
account of the Debentures.
7.5 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Article are and are intended solely for the purpose of defining the
relative rights of the Holders on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Article or elsewhere
in this Debenture or in the Debentures is intended to or shall (a) impair, as
among the Company, its creditors other than holders of Senior Indebtedness and
the Holders of the Debentures, the obligation of the Company, which is absolute
and unconditional to pay to the Holders of the Debentures the principal of (any
premium, if any) and interest on the Debentures as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Debentures and
creditors of the Company other than the holders of Senior Indebtedness; or (c)
prevent the Holder of any Debenture from exercising all remedies otherwise
permitted by applicable law upon default under this Debentures, subject to the
rights, if any, under this Article VII of the holders of Senior Indebtedness to
receive cash, property and securities otherwise payable or deliverable to the
Holder upon the exercise of any such remedy.
7.6 RIGHT TO FILE PROOF OF CLAIM. In the event of any dissolution,
winding up, liquidation or reorganization of the Company (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon any
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, with respect to the
filing of a claim for the unpaid balance of any Holder's Debentures in the form
required in those proceedings, if the Holder does not file a proper claim or
proof of debt in the form required in such proceeding at least thirty (30) days
before the expiration of the time to file such claim or claims, then the holders
of Senior Indebtedness and their agents, trustees, or other representatives are
hereby authorized to have the right to file, and are hereby authorized to file,
an appropriate claim for and on behalf of each such Holder.
7.7 NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Debenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Holders of the Debentures, without
incurring responsibility to the Holders of the Debentures and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Debentures to the holders of Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
7.8 NOTICE TO HOLDERS. The Company shall give prompt written notice to
the Holders of any fact known to the Company which would prohibit the making of
any payment to or by the Holders in respect of the Debentures. Notwithstanding
the provisions of this Article or any other provision of this Debenture, the
Holders shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to the Holders in respect of the
Debentures, unless and until the Holders shall have received written notice
thereof from the Company or a holder of Senior Indebtedness; and, prior to the
receipt of any such written notice, the Holders shall be entitled in all
respects to assume that no such facts exist; PROVIDED, HOWEVER, that if the
Holders shall not have received the notice provided for in this Section at least
two Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of, and premium, if any, or interest on any Debenture), then,
anything herein contained to the contrary notwithstanding, the Holders shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within two Business Days
prior to such date.
The Holders shall be entitled to rely on the delivery to them of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a representative thereof) to establish that such notice has
been given by a holder of Senior Indebtedness (or representative thereof). In
the event that the Holders determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness (or a representative thereof) to participate in any payment or
distribution pursuant to this Article, the Holders may request such Person to
furnish evidence to the reasonable satisfaction of the Holders as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Holders may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
7.9 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon the payment or distribution of assets of the Company referred to in this
Article, the Holders of the Debentures shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of the creditors, agent
or other Person making such payment or distribution, delivered to the Holders of
Debentures, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article VII.
7.10 NO ADVERSE MODIFICATION TO DEBENTURE. Neither the Holders nor the
Company shall enter into any modification of the Debentures which is in any way
adverse to the holders of the Senior Indebtedness.
7.11 NOTICE TO HOLDERS OF SENIOR INDEBTEDNESS. The Company will
furnish to the holders of Senior Indebtedness at the time Senior Indebtedness is
initially incurred, when there is a change in the Holders thereof, or at any
time upon request therefor, a true and correct copy of the then most current
register setting forth the names and addresses of the Holders as of such date.
7.12 SUBORDINATION AGREEMENT. The Holder by its acceptance hereof
agrees to execute and deliver to any Senior Lender such subordination agreement
as may be reasonably requested by such Senior Lender, which may deviate in
certain minor respects from the subordination provisions contained herein but
which is commercially reasonable and customary, and to execute, acknowledge,
deliver, file, notarize and register all such further agreements, instruments,
certificates, documents and assurances, and perform such acts as such Senior
Lender shall deem necessary or appropriate to effectuate the purposes of the
subordination provisions contained herein.
ARTICLE VIII
OPTIONAL REDEMPTION
8.1 OPTIONAL REDEMPTION. In the case of a Change of Control then, each
Holder shall have the right, for a period of thirty (30) Business Days following
such Change of Control, unless the principal shall have already become due and
payable, by giving the Company an Acceleration Notice, to require the Company to
immediately redeem the Debenture owned by such Holder at the Mandatory
Prepayment Amount.
In the event that the Company shall not have promptly, but in any event within
five (5) Business Days after receipt of an Acceleration Notice, shall have paid
a Holder the amount specified above the Conversion Price of such Holder's
Debenture shall automatically be adjusted to equal the average Per Share Market
Value of the Common Stock during the preceding thirty (30) consecutive Trading
Days immediately preceding the date of the Acceleration Notice, if such Per
Share Market Value is lower than the Conversion Price.
The aggregate principal amount payable in the event of an Optional
Redemption shall be equal to the sum of (i) the Mandatory Prepayment Amount plus
(ii) at the option of the Holder, the Mandatory Prepayment Amount for the
Converted Debentures that would then be held by such Holder had the principal
amount of Debentures converted into Debenture Shares (as defined herein) that
are then held by the Holder not been so converted; PROVIDED, that the Holder has
not physically received the Debenture Shares.
For purposes of this Section 8.1, the principal amount of the
Debentures is outstanding until such date as the Holder shall have been issued
Debenture Shares upon a conversion (or attempted conversion) thereof. Interest
shall accrue on the Mandatory Prepayment Amount hereunder from the day after
such amount is due (being the date of a Change of Control) through the date of
payment in full thereof at the rate of 20.0% per annum, accruing daily from the
date of conversion until such amount, plus an interest thereon, if any, is paid
in full. Payment of the Mandatory Prepayment Amount pursuant to this Section 3.1
shall be in addition to any other amounts that may be due to the Holder pursuant
to this Debenture. Within five (5) Business Days of receipt by the Holder of
payments of amounts due to the Holder, (i) the Holder shall return the
Debentures to the Company and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Debenture
Shares into which such Converted Debentures were converted. Any demand for
redemption may be rescinded and annulled by a Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Redemption or impair any right consequent thereon.
Upon delivery of any Acceleration Notice to the Company, the Company shall
provide a copy of such notice to the other Holders, if any, within one (1)
Business Day of the Company's receipt thereof. Failure to deliver such notice
shall not affect the validity of the notice delivered by the Holders in
accordance with the provisions referred to above.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATION OF DEBENTURES. This Debenture may be modified without
prior notice to any Holder upon the written consent of the Company and the
Holders of more than 75% of the principal amount of the Debentures then
outstanding. The Holders of more than 75% of the principal amount of the
Debentures then outstanding may waive compliance by the Company with any
provision of this Debenture without prior notice to any Holder. However, without
the consent of each Holder affected, an amendment, supplement or waiver may not
(1) reduce the amount of Debentures whose Holders must consent to an amendment,
supplement or waiver, (2) reduce the principal amount of or extend the fixed
maturity of any Debenture or (3) make any Debenture payable in money or property
other than as stated in the Debentures.
9.2 MISCELLANEOUS. This Debenture shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Except as specifically provided
herein, the parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Debenture, and assent to extensions of the time of payment, or forbearance or
other indulgence without notice. The Holder of this Debenture by acceptance of
this Debenture agrees to be bound by the provisions of this Debenture which are
expressly binding on such Holder.
9.3 RANK AND SUBORDINATION. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, interest and
liquidated damages (if any) on, this Debenture at the time, place, and rate, and
in the coin or currency (or, as provided herein, in Common Stock), herein
prescribed. This Debenture is a direct obligation of the Company and ranks
senior/pari passu with all Debt other than Senior Indebtedness, and is
subordinate to such Senior Indebtedness. Except as otherwise provided herein,
the Company may not voluntarily prepay the outstanding principal amount of the
Debenture.
9.4 DEBENTURES OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining
whether the Holders of the requisite aggregate principal amount of Debentures
have concurred in any direction, consent or waiver under this Debenture,
Debentures which are owned by the Company or any other obligor on the Debentures
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be outstanding for the purpose
of any such determination; provided that any Debentures owned by the Purchasers
shall be deemed outstanding for purposes of making such a determination.
Debentures so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Company the
pledgee's right so to act with respect to such Debentures and that the pledgee
is not the Company or any other obligor upon the Debentures or any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Debentures.
9.5 NOTICE TO DEBENTUREHOLDERS PRIOR TO TAKING CERTAIN TYPES OF
ACTION. In case:
a. the Company shall authorize the issuance, at any time from and
after the Original Issue Date, to all holders of any class or series of its
Capital Stock, of rights or warrants to subscribe for or purchase shares of its
capital stock or of any other right;
b. the Company shall authorize, at any time from and after the
Original Issue Date, the distribution to all holders of any class or series of
its Capital Stock, of evidences of its indebtedness or assets;
c. the Company shall declare a dividend (or other distribution) on its
Common Stock or the Company shall declare a special nonrecurring dividend on or
a redemption of its Common Stock;
d. of any subdivision, combination or reclassification of any class or
series of Capital Stock of the Company at any time from and after the Original
Issue Date or of any consolidation or merger to which the Company is a party and
for which approval by the shareholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or
e. of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; then the Company shall cause to be mailed to the Holders of
this Debenture, at their last addresses as they shall appear upon the
registration books of the Company, at such time as the Company so notifies its
stockholders, a notice stating (i) the date as of which the holders of record of
such class or series of Capital Stock are to be entitled to receive any such
rights, warrants or distribution are to be determined, or (ii) the date on which
any such subdivision, combination, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation, winding up or other action is expected
to become effective, and the date as of which it is expected that holders of
record of such class or series of Capital Stock record shall be entitled to
exchange their stock for securities or other property, if any, deliverable upon
such subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action.
The failure to give the notice required by this Section 9.5 or any defect
therein shall not affect the legality or validity of any distribution, right,
warrant, subdivision, combination, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation, winding up or other action, or the
vote upon any of the foregoing.
9.6 EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
9.7 NO RIGHTS AS STOCKHOLDER. This Debenture shall not entitle the
Holder to any rights as a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions
unless and to the extent converted into shares of Common Stock in accordance
with the terms hereof.
9.8 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
as of August __, 2000.
ALLIANCE PHARMACEUTICAL CORP.
By _________________________________
Name:
Title:
<PAGE>
EXHIBIT A
ALLIANCE PHARMACEUTICAL CORP.
CONVERSION NOTICE
Reference is made to the Debenture issued by Alliance Pharmaceutical Corp. (the
"DEBENTURE"). In accordance with and pursuant to the Debenture, the undersigned
hereby irrevocably elects to convert the principal amount of the Debenture,
indicated below into shares of Common Stock, par value $.01 per share (the
"COMMON STOCK"), of the Company, by tendering the Debenture specified below as
of the date specified below.
Date of Conversion:____________________________________________________________
Aggregate Principal Amount to be
converted:____________________________________________
Debenture no(s). of Debenture to be
converted:____________________________________________
Please confirm the following information:
Conversion Price:______________________________________________________________
Number of shares of Common Stock to be
issued:_______________________________________________
Please issue the Common Stock into which the Debenture is being converted and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
Issue to:______________________________________________________________________
Facsimile Number:______________________________________________________________
Authorization:
By:_______________________________________
Title:____________________________________
Dated:____________________________________
Account Number (if electronic book entry
transfer):________________________________
Transaction Code Number (if electronic book
entry transfer):__________________________
